Perhaps profit hospitals aren't such a great idea
Whether Eastern Connecticut Health Network, operator of two venerable charitable institutions, Manchester Memorial and Rockville General hospitals, sells them to Tenet Healthcare, a giant for-profit corporation, will be decided in a few months by the nearly 300 people serving as ECHN's "corporators," community representatives.
The sale is being proposed by ECHN's Board of Trustees on the grounds that small community hospitals cannot survive as medicine comes under more financial pressure and that big for-profit corporations can exploit economies of scale and greater access to capital for improving hospital facilities.
There are a few problems with this.
First is that, as the Journal Inquirer reported this month, Tenet Healthcare's record is appalling. In the last decade the corporation has paid more than $1 billion in fines for defrauding its biggest customer, the federal government, and another $700 million to settle lawsuits and claims of unpaid taxes. A fraud settlement of another $3.7 million was announced just a few days ago.
Tenet says this misconduct is long past and that the corporation is under new management. Maybe, but then does the new management have enough of a record to instill confidence? Whatever their weaknesses, somehow Manchester Memorial and Rockville General have managed to operate for generations without such misconduct.
Then there's the chance that the ECHN board's premise - that medicine will keep getting squeezed - is wrong. Tenet itself disagrees, believing instead that medicine is likely to be a growth business as the population ages and a national insurance system turns charity cases into paying customers. While "Obamacare" is too complex, having been designed by bureaucracy-loving Democrats amid the cynical refusal of efficiency-minded Republicans to help design it, it is more likely to be simplified than repealed.
There is also the possibility that ECHN's hospitals are not managed as well as they should be. Some executive salaries are wild. Raises and promotions are still being given despite hard times. ECHN has expanded in areas really not familiar to its corporators.
Perhaps most important of all is simply the prospective loss of community control over community institutions.
For example, Tenet may promise not to close or diminish Rockville General for a few years. But the communities served by Rockville General will still be around when such a promise expires, and how will they stand with out-of-state ownership then? Like any investor-owned corporation, Tenet exists first to make money for its investors, in its case by operating hospitals. While good hospital operation may be good business, Tenet's record demonstrates that bad hospital operation has been pretty good business too.
Indeed, Tenet's record suggests that the financing of medical care in the United States is largely a matter of cheating the government and other insurers to run up the bills. This may be the nature of a system based on third-party payments, a system in which everybody, starting with patients themselves, tries to shift the cost to someone else. That's why "Obamacare" inadvertently has begun to make the case for a national medical insurance system based instead on direct tax credits to individuals for buying insurance and establishing medical savings accounts.
As it is now constituted ECHN, at least in theory, answers only to its communities, as represented by its corporators. Unfortunately those corporators have been silent as ECHN's managers have exploited the hospitals and have declared without much explanation that the hospitals no longer have a future as community institutions. With their silence the corporators have defaulted as community representatives. If the community is not to be represented, the hospitals might as well be sold - along with everything else.
But while the hospitals always can be sold, now or later, once they are sold their community is not likely ever to recover them.
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